Studies show that most families do not have a financial plan in case of divorce or the death of a spouse, so parents in Pennsylvania who get a divorce might be concerned about how they will pay for their child’s college education. After a divorce, spousal and child support may need to take precedence over saving for college. However, with college costs continuing to rise, parents may also want to include provisions for these expenses in the divorce agreement.
Maintaining two households can be expensive, and families might have to scale down their expectations for college and look for scholarships and loans. If they already have a 529 savings plan, they may want to address its use in the divorce agreement. Withdrawals from a 529 plan are not taxable if they are used for education, but usually, one parent owns the account. That parent can change the beneficiary or account owner. In addition to specifying that the account should be used for education, parents may want to both have the ability to monitor it, or they might want to split it.
Plans for contributing to college in a divorce agreement usually include limitations. For example, parents may agree to contribute for five years. Working with financial planners during and after divorce might help parents plan for college and for other challenges of life after divorce.
It is not uncommon for people to have a drop in their standard of living after divorce, so understanding finances thoroughly while negotiating property division is important. When looking at the value of assets, people should keep in mind that some may have expenses associated with them. For example, some retirement accounts are taxed on distribution, and there may be penalties for withdrawals before a certain age. The couple may want to sell the family home if neither can afford it on a single income.